SINGAPORE - Sunvic Chemical Holdings on Thursday (Jan 10) said two of its subsidiaries have received letters of demand in relation to corporate guarantees provided for loans amounting to some 222.5 million yuan ($44.3 million).
The first corporate guarantee was provided by Sunvic's subsidiary, Yixing Yinyan Import & Export Co to Jiangsu Donglai Real Estate Development Co, a party unrelated to Sunvic. A repayment of 183.7 million yuan is being sought by Yixing City Futao Rural Micro Credit Co. This comprises 180 million yuan as principal repayment, and 3.7 million yuan as accrued interest payable.
Jiangsu Donglai is negotiating with Yixing Futao Credit to achieve an amicable resolution to the claim, the group said.
Separately, Sunvic's other subsidiary, Jiangsu Jurong Chemical Co, has also received another letter of demand in respect of a loan entered into between the Bank of China (BOC) and Jiangsu Dahe Lvjian Chemical Co, a third party unrelated to the company. Bank of China is seeking repayment of 42.97 million yuan, comprising 42.5 million yuan as principal repayment and the remainder as accrued interest.
In a regulatory filing on Thursday, Sunvic noted that Jiangsu Jurong started to provide the corporate guarantee as part of an arrangement with Jiangsu Dahe which commenced in 2011, under which both parties had respectively provided corporate guarantees up to the loan amount of 200 million yuan to facilitate the securing of the other party's bank loans. The amount guaranteed under this arrangment has been reduced over the years, and this guarantee represents the only outstanding corporate guarantee provided by Jiangsu Jurong for Jiangsu Dahe, Sunvic said.
Apart from Jiangsu Jurong, the BOC loan was also secured by eight other corporate and personal guarantees. Sunvic's board has been informed that the other BOC guarantors related to Jiangsu Dahe have expressed their willingness to repay the BOC claim amount.
Sunvic added that in the event Yixing Futao Credit and, or BOC decides to enforce the corporate guarantees against its subsidiaries, the group will be unable to make payment for both claim amounts based on its current financial resources, and without having to realise its assets. As at Sept 30, the group's cash and bank balances stand at 54.1 million yuan, with unaudited net tangible assets at about 856.9 million yuan.
The receipts of these letters of demand may also be regarded as an event of default under the group's existing banking facilities in China, triggering among others, immediate repayment obligations and termination of such banking facilities, resulting in a "material adverse impact on the group's cash flow", Sunvic said.
The group added that it will continue its investigations into matters relating to both guarantees, including the circumstances that led to these provisions, and any wrongdoing by the management.
Sunvic's board also noted that it will seek the legal advice necessary at the appropriate time to protect the group, and will keep shareholders updated on material developments.
Sunvic is a manufacturer of intermediate chemical products, such as acrylic acid and acrylate esters. The company was placed on the Singapore Exchange's watch list on June 8 last year for failing both the minimum trading price criteria and the financial entry criteria.
Shares in Sunvic last closed flat at 2.2 cents apiece on Jan 4, before the company requested a trading halt earlier this week on Tuesday.